Stock Markets Still Under Pressure

Global stock markets remained under pressure throughout yesterday’s trading as geopolitical issues continued to weigh. Political turmoil in Italy dominated headlines throughout the European session as fears increased that a new election could also include a referendum on the country’s continued participation in the EU. Italian bond yields surged and the euro continued to trade with limited rallies, although it’s far from crashing and still holding in above 1.1500 – further woes could see that situation change swiftly and open the way to 1.1200.

The continued lack of certainty over trade negotiations between the US and China and indeed the US and most parts of the world also remains a concern for investors and this has added to the growing pressure on the markets. The benchmark US 10-Year came off once again – as much as 17 basis points at one point as volatility soared during the New York session and traders sought safe haven assets – CHF, JPY and Gold all rallying.

Looking ahead to today, markets are bracing for more of the same as geopolitical factors continue to dominate market sentiment. We do have some interest in the central banks in Asia today with both BOJ Governor Kuroda and RBNZ Governor Orr speaking as well as a surprise meeting of Bank Indonesia where they are expected to raise rates by 25bps to combat the volatile IDR.

Into the European session and the Italian situation will be the major focus and will supersede a raft of second tier data due out of Germany and France. We have the ADP Non-Farm and US Prelim GDP data due in the New York session before the focus moves north of the border to Canada and the BOC latest rate decision and statement. Expectations are firmly entrenched in the ‘no change’ camp but investors will be closely monitoring the statement with regard to recent moves in the oil price as well as the ongoing NAFTA negotiations.

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